Another no-show by the confidence fairy… November 8, 2012

Yet another report on consumer confidence in the SBP, by Pat Leahy. And the news is – as is all too predictable – not entirely great.

Consumer confidence has taken another battering in recent months, according to the latest Red C tracking survey, with expectations of a tough budget pushing confidence to its lowest level in a year.

Indeed the figures are telling:

People also feel more of a “personal impact” from the recession in the last three months according to the survey, the first since June.
Some 40 per cent of consumers say that the recession has had a “high impact” on them in the past three months. Those aged 45-64 and those with children are more likely to have felt a severe impact from the recession.

That too is not a surprise. And it has clear problematic aspects for the next month or so:

The decline in confidence is reflected across a range of indicators. Some 39 per cent report a high impact on their “way of life”; 45 per cent report a similar impact on their monthly spending. These numbers are up by 9 per cent and 8 per cent respectively from June, suggesting further weakness in domestic demand in the run-up to the Christmas season.

But all is not lost. The confidence fairy may not have showered us with optimism dust, but even so, Leahy reports some ‘hints of optimism’. I don’t know though. Reading the data it seems to me to be something of a fools paradise for those who think that way.

Almost half of people feel that the Irish economy will fare the same or better in the next six months – the highest level of optimism about the future recorded in more than a year.

Let’s consider the logic of this. Another recessionary ‘austerity’ budget, about to pull yet more monies from expenditures (indeed the same edition of the SBP suggested that Michael Noonan would have to find an extra third of a billion ‘savings’ on top of those already pencilled in) is about to be introduced. How, in the name of God, is it feasible that this will ameliorate the situation? Though the following stat is revealing:

Those older than 65 are the most optimistic; other surveys show that they have experienced the recession less severely than other groups.Almost 60 per cent believe the world economy will improve or stay the same in the next six months.

It will be interesting to revisit those figures in light of some of the changes suggested for pensioners (indeed, also in the SBP is news that means testing for travel will be introduced for pensioners, and perhaps other measures).

And not only, but also:

Expectations of the housing market have also improved since June. Nearly a quarter of consumers (23 per cent) expect the market to improve in the next six months, an improvement of some 6 per cent since June.The survey was conducted among more than 1,000 adults in mid-October.

Which is wonderful, except the figures are still abysmal.

I’m interested to know whether people feel they’ve felt particular impacts in the last three months from the recession over and above the previous three? And what of confidence?

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I haven’t read Leahy’s original analysis, but based on the analysis above it would appear to be standard issue SBP delusional thinking. Incidentally the week before last David McWilliams made one coherent point when he mentioned that when interest rates start to move north again, which will happen soon enough, it will provoke a mortgage crisis for the hundreds of thousands on tracker mortgages, who have been, more or less, able to maintain and service a stable mortgage payment regime over the past few years.

You’d have to wonder what the basis for the optimism is. If it’s based upon upbeat pronouncements on the mass, which I suspect it is, then it’s not optimism but delusion.

Personally, each month brings the standard of living down a notch and over the past twelve months is has gone down appreciably, with lots of difficult choices having to be made. Still far from the poverty line but, still, austerity has involved considerable circumscription of personal autonmy and choice.

What I sense is emerging is what I’d call Fine Gael vision of society, or rather the Fine Gael utopia. Not that’s is a conscious vision but it’s discernible from broad direction in which this society is evolving. In rough terms, the ultra rich are left alone with maybe a few cosmetic charges and taxes; a steady middle class who will still have a decent standard of living and personal autonomy and retain the capacity to finance self-development (education, culture, travel etc) and, then, the rest, the vast majority (i.e. including most people who post, comment and follow the CLR). For us it’s clear that Fine Gael, and the forces that propel and sustain it, see the role of the vast majority of middle and low income people as to continue to carry the burden of taxation, and take on even more, AND make do with either no disposable income or a paltry disposable income and to content ourselves with increasing drudgery (i.e. more attacks on working conditions). Since in a capitalist society access to culture and leisure is, to considerable degree, correlated to access to finance, attacks on the financial resources of the vast majority – which is what austerity ultimately is – brings with it a concomitant reduction is access to many of the good things in life.

It’s clear to me that many people, particularly educated young people in their 20’s but to others too, are giving in to despair and, consequently, giving up on this society and getting out as quickly as they can. And who can blame them when we know that nearly half the population have 100 euro of less to live on after bills are paid, and that’s before this budget and the ones to come – no forgetting the implementation of the austerity treaty in 2015.

So, the ‘confidence fairy’ may be all we’re left with in the coming years! That and the SBP telling us that things aren’t really too bad.

Funny you should mention interest rates. Just today the ECB held them at their previous level, but as one person pointed out in comments on the IT website, what’s the good of that when AIB is raising them with no reference to the ECB rate. I think you make a crucial point re what happens when they inevitably rise from their current historic lows. That’s going to screw hundreds of thousands and make a mockery of this rhetoric of confidence. To be honest I’d forgotten about that element of it when writing the above, and I wish I hadn’t because that’s a fundamental flaw in the confidence line.